Worker Misclassification in the Gig Economy

The growth of the gig economy has intensified arguments about businesses’ efforts to properly classify workers as either employees or independent contractors.  California has passed legislation that went into effect at midnight on December 31, 2019. This legislation will make it far more difficult for employers like Uber and DoorDash to classify workers as independent contractors. If the workers are deemed employees, employers will be required to ensure that they receive minimum wage, overtime pay, expense reimbursement and other costly benefits, such as health insurance.  There will also likely be huge tax implications, with employers potentially having to pay fines and unpaid employment taxes.

Several corporations and business associations have filed suit seeking to block the law, but as of the first of the New Year, only one plaintiff has had success.  The California Trucking Association was awarded a temporary injunction by a federal judge, which will prevent the law from impacting over 70,000 independent truckers who work in California.  Photographers, freelance writers, courier services and Uber have also made similar requests of the federal court system.

While the legislation only affects workers in California, businesses all over the country have followed the proceedings with interest because California can be a beacon in establishing policies that are adopted in other states and localities.  For example, New York State and the city of Seattle are already moving towards legislation to regulate workers in the gig economy. Even without new legislation, there has been a spate of lawsuits filed across the country by employees seeking judicial determination that they have been misclassified as independent contractors and are therefore entitled to additional compensation.  

Given the changing nature of the gig economy, as well as developments in the law, employers attempting to draw the line between employees and contractors should seek the advice of experienced employment law counsel. 

Article written by WK Partner, Melanie Kilpatrick.